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According to news reports a former employee of Bird Chevrolet has been accused of submitting a false sales report for a new vehicle so the dealership could earn a $21,500 incentive from General Motors.

In the category of "what the hell was he thinking" the employee, James A. Walsh, is accused of reporting the sale of a new GM vehicle to a customer who visited the dealership for a test drive. The local authorities were made aware of the false sales report when the customer asked why she was receiving a DMV renewal notice for a vehicle she didn't own.

In fairness to Mr. Walsh, everyone should be presumed innocent until proven guilty and it's possible there's an explanation that will resolve the situation.

That said, I think there's no question that "stair step" and "retro" incentives from the factory can put tremendous pressure on Dealer Principals and their employees and the temptation to break the rules can be very strong.

Unfortunately this is what comes along the stair-step incentives! I always have to wonder "in what world is falsifying a sale or even purchasing the vehicle to use as a service loaner worth it for getting $20k in volume incentive?"

I have only once even purchased a new car for used inventory to use as a loaner... and that is only because the vehicle sustained $10,000 damage on the lot and had a bruised Carfax after the police report.

Unfortunately this is what comes along the stair-step incentives! I always have to wonder "in what world is falsifying a sale or even purchasing the vehicle to use as a service loaner worth it for getting $20k in volume incentive?"

I totally agree.

In this case I wonder why the employee chose to report the sale of the vehicle to a person who was in the dealership to test drive a vehicle? If a person was going to do something that was unethical/illegal you'd think they'd want to minimize their chance of getting caught.

Who knows, maybe there's an explanation that will prove there was no wrong-doing.

Unfortunately this is what comes along the stair-step incentives! I always have to wonder "in what world is falsifying a sale or even purchasing the vehicle to use as a service loaner worth it for getting $20k in volume incentive?"

I have only once even purchased a new car for used inventory to use as a loaner... and that is only because the vehicle sustained $10,000 damage on the lot and had a bruised Carfax after the police report.

Thankfully it's not one that helped my hit my number or anything.

Buying a vehicle or "giving a few away" to hit a quarterly incentive number is not at all uncommon among large volume stores in my experience, and it's a lot more than $20,000 at stake most of the time. Got a buddy that has a store selling 100+ units a month that I know has done it several times. For example on a 90 day stair step incentive retro to first unit at different volume levels. last week of the 90 days, he's at 100% level paying$1,000 per unit and is just 10 units away from hitting $1500 at 125%...those 10 units are GOING to be sold to friends or family members at a huge discount...maybe with the agreement that they will buy them back in 30 days at the discounted price. that's $500 per unit back to unit #1...comes up to $150,000+ difference on the payment. Give'm away at $5k back of cost and make an extra $100k net.

Buying a vehicle or "giving a few away" to hit a quarterly incentive number is not at all uncommon among large volume stores in my experience, and it's a lot more than $20,000 at stake most of the time. Got a buddy that has a store selling 100+ units a month that I know has done it several times. For example on a 90 day stair step incentive retro to first unit at different volume levels. last week of the 90 days, he's at 100% level paying$1,000 per unit and is just 10 units away from hitting $1500 at 125%...those 10 units are GOING to be sold to friends or family members at a huge discount...maybe with the agreement that they will buy them back in 30 days at the discounted price. that's $500 per unit back to unit #1...comes up to $150,000+ difference on the payment. Give'm away at $5k back of cost and make an extra $100k net.

You make an excellent point.

In many ways our industry has reinforced the old theory that the best time to go shopping for a new vehicle is at the end of the month or the end of a quarter. Dealers will often do crazy things on an individual car deal if it allows them to hit a store objective.

I've often wondered if a broker couldn't make a decent living by finding customers who wanted to by cars under cost and then shopping those deals with dealers who needed extra units to hit a program incentive. Hell, I'm sure there are dealers who would sell units at a loss just to make the MSR pressures go away.

In many ways our industry has reinforced the old theory that the best time to go shopping for a new vehicle is at the end of the month or the end of a quarter. Dealers will often do crazy things on an individual car deal if it allows them to hit a store objective.

I've often wondered if a broker couldn't make a decent living by finding customers who wanted to by cars under cost and then shopping those deals with dealers who needed extra units to hit a program incentive. Hell, I'm sure there are dealers who would sell units at a loss just to make the MSR pressures go away.

Downside to that is that once you show you CAN hit an inflated MSR # (by whatever means), then that becomes the MSR standard you are expected to meet going forward whether there's an opportunity to make a big payday or not.

Downside to that is that once you show you CAN hit an inflated MSR # (by whatever means), then that becomes the MSR standard you are expected to meet going forward whether there's an opportunity to make a big payday or not.

You make a good point.

While I agree 100% that if you hit a stair step objective (by whatever means) you're almost always rewarded with an even higher objective for the next program.

With MSR, however, if the OEM is basing MSR off of state and market-wide data then it could be argued that a dealer who obtains some extra NVDRs would be able to institute a quick fix that wouldn't have a material impact on future MSR requirements.

That said, it's been a long time since I've heard about an OEM terminating a dealer because of MSR concerns so the whole topic may be somewhat theoretical.

We have a dealership in our district averaging 33% MSR over the last few years, so it's probably not worth pursuing a termination and the costs for corporate that would come with it.

Likewise, with MSR tied more to state and DMA registration trends than our prior performance we have stayed between 200% and 250% MSR for two years. Over the last year we have not had a large change on a "carrot" number for the VGP program either... it has stayed pretty consistent even as our average retail new per month has gone from 65 to 95.

We have a dealership in our district averaging 33% MSR over the last few years, so it's probably not worth pursuing a termination and the costs for corporate that would come with it.

I totally agree.

In the old days an OEM may have taken on a dealer that had a 33% MSR to set an example for the rest of the dealer network but that's no longer the case today.

Quote:

Originally Posted by mryan55

Likewise, with MSR tied more to state and DMA registration trends than our prior performance we have stayed between 200% and 250% MSR for two years. Over the last year we have not had a large change on a "carrot" number for the VGP program either... it has stayed pretty consistent even as our average retail new per month has gone from 65 to 95.

That's a really interesting comment.

In the old days I remember asking a DOM for the formula for MPA/VPA because I wanted to create an Excel spreadsheet and calculate the store's objective on my own.

I quickly learned that the MPA/VPA objective was about as complex as cracking a nuclear code but I was intrigued that one of the variables was MSR. Essentially, dealers with very high MSR percentages were spared from the "hit then miss" cycle that most other dealers faced with their objectives.

It's one of the reasons I've always been intrigued by the Dave Smith Motors business model. Not only does Dave Smith have a super-low overhead because they're in a rural market, they also have the benefits associated with having a super high MSR percentage.